Saturday, 14 Apr, 2007 Technology

Google buys DoubleClick, Microsoft still too far from online ads


Yet another big deal with the search engine giant involved: yesterday Google agreed to pay very big money for a famous online ad company: DoubleClick. This acquisition became the largest purchase for the company, as it paid $3.1 billion for the DoubleClick, which is almost twice as much as it paid for YouTube last year. Google people consider the fact that DoubleClick did not become Microsoft to be very important too.

The $3.1 billion paid for the DoubleClick, based in New York, made Google one step (and a huge one) closer to becoming an online ad tycoon.

DoubleClick is an ad house, which makes special software for online advertisement. The company has many large connections with web publishers and advertising agencies, which made this business an important acquisition for Google.

DoubleClick uses its software to gather useful information from the Internet users about their interaction with the ads to determine the optimal place to delivery the best effect of an advertisement.

Now experts predict a change in the online advertising strategies, as when the two giants combine there resources, we, simple web surfers, could get something more than a simple contextual ad, but an ad meant to satisfy the mot refined tastes of various users.

The negotiations about selling DoubleClick lasted a few weeks and at some time involved not only Google, but there were also Yahoo, AOL and (oh no!) Microsoft involved.

It is clear that Microsoft wanted to get its hands on the online ad enterprise, as it would make Microsoft accelerate in the online ad businesses' race. And yet, Google has bid more money than Microsoft did, despite all the financial might of the software tycoon.

Jordan Rohan, analyst at the RBC Capital Markets, suggested that with Microsoft overboard, Google is now free to implement its new strategies in the online ad technologies.

Another important fact about the acquisition is that Google will become more competitive against Yahoo! - Google's all-time rival in Internet search and online advertising. Yahoo is still first on the online ad market, yet Google's made a serious claim against it with buying DoubleClick.

Google and DoubleClick are enterprises with the same goals, but different ways. Google specializes in small contextual ads, which have now become something like a symbol of the flourishing Internet. DoubleClick's ads on the other hand, are more advanced and colorful. Not so long ago DoubleClick has also started displaying some video ads. Google also tried to conquer this niche of ad business, but didn't enjoy much success.

Dave Morgan, chairman of Tacoda, another online ad network, said that Google needed a strong partner to enter the display advertising, which the company wanted to initiate so badly. DoubleClick is probably the best partner one could possibly think Google could team up with to enter this display advertising.

There is also an opinion that $3.1 billion is a way too high price even for DoubleClick, but what Google gets with this purchase is something more than just DoubleClick's yearly profit. And besides, according to Google's last year revenue papers, they had about $11,25 billion in cash and other marketable securities. So they can feel free to go shopping

What Google was also interested in when negotiating the purchase is the DoubleClick's new exchange that makes Web publishers and ad buyers come together on a site to bid at actions for ad space.

Some experts are a bit skeptical about this merger. They ask how Google will manage these two businesses together, avoiding interest conflicts between the two divisions. And indeed, if the current DoubleClick clients see that Google uses DoubleClick only to improve its own ad technique, they might break up the connection.

David Rosenblatt, the CE of DoubleClick, said that many of the companies clients are engaged in long-term contracts, which will provide Google with the necessary first clientèle. Mr. Rosenblatt has also mentioned that his company will strive to maintain a neutral position towards its clients. The CEO has also said that Google didn't buy the technology, but they have bought the DoubleClick's relationships with its clients. This way Google will do absolutely everything to keep those clients near and will do they best to make the clients become even nearer.

David Rosenblatt also admitted that not only Google will benefit from this acquisition, as DoubleClick will also have some good time working with Google. Mr. Rosenblatt mentioned that Google's immense ad network can give DoubleClick many opportunities to turn more visitors' clicks on their sites into money.

During the late 90's DoubleClick enjoyed some success on the markets as it became the explorer of the online advertising. In 2005 two equity firms, Hellman & Friedman and JMI Equity, partnered in a $1.1 billion deal to make DoubleClick a private business. Then they sold an e-mail and two data ad businesses to subsequently acquire Klipmart - a company specializing in online video. From that time DoubleClick has had about $300 million revenue and $50 million earning from online ads, which was before last year's interest, depreciation and taxes.

The participants at negotiations said that at some regard it was a mere matter of money. Yesterday Google outbid Microsoft, just as it did it about a year ago, when the two Goliaths were struggling to become an official dealer of ad places on Time Warner's AOL. Then, Google paid $1 billion for a 5% stake in AOL.

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